GBP: Guided by Brexit negotiations and rate hike expectations – Danske Bank

Last week’s meeting of the UK’s so-called ‘Brexit war cabinet’ did not reveal anything about the UK’s negotiating position and any indication that a transition agreement could be drawn out will be negative for GBP, according to analyst, Aila Mihr at Danske Bank.

Key Quotes

“Besides Brexit, focus will be on the CPI release tomorrow, not least now the Bank of England may hike in May. Market is already pricing in around 70% probability of a rate hike in May, and we would need to see a significant upside surprise in the CPI figures to lift UK interest rates higher this week. We expect the BoE to hike twice in 2018. This is more hawkish than consensus and market’s pricing and we expect EUR/GBP to decline to 0.84 in 12M.”